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Taxes can be a complicated and confusing subject. Most organizations want to be reimbursed for Value-Added Tax (VAT) but reclaiming VAT has traditionally been a manual and time-consuming process. The reality is most organizations are set up to manage their own business not VAT, which requires a high degree of understanding, as some countries reimburse for VAT while others don¡¯t.

However, there are plenty of reasons for your organization to get VAT right, especially since it can help recoup business costs and ensure compliance.

Jeanne Dion, Vice President of the Value Teams at SAP »ÆÉ«¶ÌÊÓƵ, spoke with Dr. Mark Stirling, Senior Vice President of Global Channels at Blue dot, a recent SAP »ÆÉ«¶ÌÊÓƵ Partner Innovation Award winner, about domestic and foreign tax compliance.

You can listen to this episode on??|??|??|??|??|??or read the transcript.

Tracking and Proving Business Expenses

If an employee travels for business within their own country and they incur legitimate and eligible business expenses while on that trip, their employer can reclaim those expenses as domestic VAT (via a tax deduction). Anytime that employee travels outside their own country, that is international VAT.

There are two parts to reclaiming VAT:

1. Eligibility, which means expenses you can reclaim if all your data is correct and the country where the costs were incurred reimburses for VAT.
2. Disqualification, which refers to VAT you could get back, but you don¡¯t have the right evidence to qualify for it yet.

The VAT Refund Process

To reclaim VAT, employees must track and expense every part of a business trip. Then, your organization must go through the process of qualifying, auditing, and proving that those costs were legitimate and eligible business expenses. After that, your organization can submit a request for VAT reimbursement to the country where the expenses were incurred. If the authorities in that country agree with the request, they will remit payment to your organization.

To get to that point though, your organization must:

1. Design your expense system to capture the right data.
2. Educate your employees on what must go in the data.
3. Have the right review processes in place to ensure the data is accurate.

Understanding VAT Disqualification

If your organization has expenses that are being disqualified, you need to know why you aren¡¯t getting VAT back:

• What can you do to change disqualification of VAT?
• Do you not have the right processes in place?
• Do you not have visibility into data and/or reports to reclaim VAT?
• Does your organization need to do more training?

Dion says that when it comes to expenses, taxes, and VAT, organizations need to be looking at ¡°what you already have in place for controls, where the gaps in your controls are, and where an automated tool like a Blue dot tool could close some of those gaps for you.¡±

Also, keep in mind that the government can do an audit and check the controls that your organization has in place for those processes. For instance:

• How do your organization¡¯s employees understand what business expenses they are incurring?
• How does your organization know those expenses are legitimate?
• Do you have the right evidence to justify a tax deduction?

There can be fines and penalties if your organization isn¡¯t in compliance. But the bigger concern for most organizations is potentially being blacklisted by domestic or international authorities.

A Better Way to Regaining Tax & Managing Compliance

Because reclaiming VAT is such a highly complex process, Dr. Stirling says Blue dot knew it had to remove people from the process and add automation, so that business travelers and organization spenders didn¡¯t have to know or keep track of all the tax laws, regulations, and rules related to tax and VAT; or review and double-check processes before submitting their expenses.

The Blue dot technology essentially does all the heavy lifting for organizations by understanding the expense report and event and adding in all the VAT information that¡¯s needed before it is submitted for reclamation.

Dr. Stirling says that employees want to do the right thing by their employer when it comes to these processes, but organizations must make it easy for them. In addition to removing people and complexity from the process, organizations also need a tool that will ¡°provide the insights that they need to modify their policy and modify behavior.¡±

All of this can make a tremendous difference in managing tax compliance and reclaiming VAT.

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